WARY RETAILERS REIN IN PLANS FOR 1999

Lisa Morrell And Paul Merrion

Traditional retailers are retrenching for 1999, as ebbing consumer confidence and growing economic uncertainty dim the outlook for the holiday sales season and beyond.
The weaker outlook has some department and specialty stores planning to rethink budgets, forgo purchases of experimental merchandise and promote values aggressively in the coming year. However, talk of an economic slowdown hasn't dampened plans for remodeling or opening stores.
Even so, retailers anticipate belt-tightening measures next year, when making money is expected to be a bigger challenge.
Except, that is, for discount chains. Consumers -- spooked by stock market volatility, the Asian financial crisis and a slowing economy -- appear to have begun shifting to discount stores.
Prospects for holiday sales at traditional stores are weaker than initially estimated this year. However, the outlook is "not a disaster," says Sid Doolittle, partner with Chicago retail consulting firm McMillan/Doolittle LLC. He predicts sales nationwide for the November-through-January holiday season will be up 3.5% compared with the 1997 holiday season, which rang up a 5.3% increase.
After the holiday season, retailers will play defensively until they see how sales shape up in the early months of 1999.
"Retailers are going to

Traditional retailers are retrenching for 1999, as ebbing consumer confidence and growing economic uncertainty dim the outlook for the holiday sales season and beyond.

The weaker outlook has some department and specialty stores planning to rethink budgets, forgo purchases of experimental merchandise and promote values aggressively in the coming year. However, talk of an economic slowdown hasn't dampened plans for remodeling or opening stores.

Even so, retailers anticipate belt-tightening measures next year, when making money is expected to be a bigger challenge.

Except, that is, for discount chains. Consumers -- spooked by stock market volatility, the Asian financial crisis and a slowing economy -- appear to have begun shifting to discount stores.

Prospects for holiday sales at traditional stores are weaker than initially estimated this year. However, the outlook is "not a disaster," says Sid Doolittle, partner with Chicago retail consulting firm McMillan/Doolittle LLC. He predicts sales nationwide for the November-through-January holiday season will be up 3.5% compared with the 1997 holiday season, which rang up a 5.3% increase.

After the holiday season, retailers will play defensively until they see how sales shape up in the early months of 1999.

"Retailers are going to be very careful in keeping things lean and tight in terms of expenses," Mr. Doolittle says.

They will look to manage payroll, inventory and suppliers more efficiently in the new year, and some are adjusting budgets.

"We're keeping our plans on the conservative side for Christmas and spring," says Scott Baskin, president of Al Baskin Co., the Burr Ridge-based parent of apparel retailer Mark Shale. He forecasts a 4%-to-7% sales increase for the holiday season at Mark Shale, compared with a rise of 10% last year.

Cautious retailers will direct their buyers not to take chances with experimental merchandise and lines.

At Deutsch Luggage, which operates four specialty stores in the Chicago area, "we're going to stick to the basics -- our bread-and-butter merchandise -- until a point when we're comfortable with loosening up the purse strings," says President Howard Deutsch.

To motivate hesitant consumers to open their wallets, retailers will ratchet up promotions, Mr. Doolittle says. Advertising, even at discount stores, will highlight more major price reductions and value items.

And discount stores will continue to cash in as increasingly dollar-conscious consumers seek out more moderate- and low-priced merchandise.

During August and September, discounters posted the strongest gains among retailers. In September, for example, Arkansas-based Wal-Mart Stores Inc., Kmart Corp. of Troy, Mich., and Minneapolis-based Dayton Hudson Corp.'s Target Stores reported same-store sales gains of more than 5%.

By contrast, traditional retailers have found sales slower than expected since August -- tempering their hopes for a strong sales finish to the year after a stellar first half. Consumer confidence similarly dipped in late summer.

Still, retailers say they are bullish for the long term. Mark Shale, for example, is going ahead with long-term capital spending plans. And Crate & Barrel plans to open four to six new stores next year, possibly including one in Chicago, according to a company spokeswoman.

"Our plans are more optimistic than contingency," she says. "We're going ahead with everything as if it's going to be a great year."